I met Shaun Tan for the first time in 1996, at a science-fiction convention in Perth, and only half-remember meeting him. He's quiet, shy, generally unassuming. I got to know him slightly better with each subsequent trip to Australia, and he got used to me introducing myself to him and him telling me that actually we'd already met. He's an artist and a writer and now a director, possessor of a peculiar and singular vision. As an artist he combines real drawing skill with a profoundly off-kilter imagination, his characters, human and otherwise, are at the same time funny and enticing; as a writer and storyteller he creates stories, sometimes wordless, always told with an economy of words, which manage to be both alienating and embracing: a child on a beach finds an alien monster inside something (a box? a house? a spaceship?) and brings it home, dealing with a Kafkaesque bureaucracy; an immigrant comes to live in a distant country where everything is different and inexplicable; a foreign exchange student is a tiny, leaf-like botanist; surreal images of depression and hopelessness almost, but do not, overwhelm a small girl, and at the last there is magic and hope.

Tan's vision is intensely personal, but not exclusionary. People love what he does. I've had Australians press his books on me in Australia and bring them as visiting gifts when abroad. His film The Lost Thing won an Oscar as best animated short (fellow Perthling Tim Minchin does the voiceover). He was given the 2010 Astrid Lindgren Memorial award, the only children's award that comes with real money, and the other people on the longlist did not mind. Well, I didn't, anyway, and I was nominated.

He lives in Melbourne. He's not very tall, and he has an easy smile when he relaxes. He does not seem to mind that I only spell his first name right half the time.

He told me once that he began writing after The Rabbits, his award-winning book, started life as a 16-line fax from Australian author John Marsden, which took Shaun a year to illustrate. "And he got half the royalties," he said. But his pictures and his stories are all of a piece.

I had a Shaun Tan painting done on a bottlecap hanging on my wall for a year.

We met this year at the Edinburgh book festival. Shaun was teaching a masterclass there:

Neil Gaiman: A few months ago I was doing a tour for American Gods and I stopped in Seattle for a day. I got an email from Tim Minchin who I'd never met, but we'd been following each other on Twitter and he'd met my wife a few weeks before in Boston, so I said come to lunch – it's a Locus Awards lunch [a prize for Science Fiction].

Shaun Tan: Yeah, a couple of Locus emails arrived [Tan won the best artist award] and somebody said Tim Minchin can accept on your behalf. I thought: why is Tim Minchin at a Locus function? What's the connection? I couldn't figure it out … So were you the connection?

NG: I was the connection! We went in and somebody came over and said to him "Shaun's won this award for The Lost Thing – can you accept it on his behalf?" and he got up and made a hilarious speech. It was just one of those strange, wonderful things. So my first question is, why did you cast Tim Minchin as the narrator in The Lost Thing?

ST: We were dithering for a long time. We had everything sorted out except the voice artist and his name just came up. I went to university with him, although I didn't know him well, even though I realised later that I'd illustrated some of his poems. But an animator mentioned him as did some people in the UK – it seems that he's better known in the UK than in Australia – and so I looked him up and caught up on everything he'd been doing. I was looking for examples of hi s normal speaking voice and I thought yes, that sounds like the right voice, there's some warmth in it but it's not polished. There is something about him that's almost a little bit raw. He already knew the book and he remembered me vaguely from university too, and he said yes straight away. There was also the fact of his coming from Perth – there is something very laconic about the tone of the story that Perth people recognise straight away.

NG: Your stuff is always laconic. One of the things I love about it is that a picture is worth a thousand words and you make your pictures work very hard.

ST: Part of it is that I don't trust myself as a writer. I still lack confidence, probably because the first 20 or so stories I wrote were roundly rejected. I actually started out as a writer and then converted to illustration because I realised that there was a dearth of good illustrators in genre fiction, at least in Australia at that time. I diverted all of my resources to visual imagery, and as a result I noticed that my writing did become more and more pared down, until it started to approximate my normal speaking patterns. When I write a story I imagine I'm telling it to someone like my brother. And we don't talk that much [laughs] – it condenses everything down and that's a very Australian thing, too.

NG: That's what I loved about the story of Eric – the foreign exchange student – where it feels almost as if the words are the illustrations and the pictures are the story. You could have this strange, wordless experience with Eric. You could animate that with no dialogue or words at all, but the words add a kind of gloss and a little bit extra.

ST: The text illustrates the pictures – it provides a connective tissue for me. I usually refine the text last, partly because pictures are harder to do so it's easier to edit words – I use text as grout in between the tiles of the pictures. I always overwrite, really awful, long bits of script and then I trim it down to the bare bones and then add a little bit to colour it in. At the end of all of my stories I test for wordless comprehension. So I remove the text and see if it works by itself. And if it does I feel that that's a successful story. I don't know if that's an important principle but it's helped me structure things.

NG: Another thing I loved about Eric was the feeling that, again, you knew so much more than you were putting in the story – it seemed like a botanical exploration of the universe, as if he was an alien botanist …

ST: Yeah, like ET, I guess. It all started with looking at nuts and drawing them and thinking wouldn't it be great to have an entire culture, a civilisation, based entirely around nuts and the sheer variety of different types of nut. In my sketchbook I had, among thousands of dud sketches, one which could also have been a dud but it was of a little demon character, with a three-pointed head. In the original sketch there was a suitcase next to him and then the word Eric underneath and that was enough to trigger the story. I combined that with an experience we had with a house guest, a guy from Finland, a friend of my wife's who is Finnish. I don't know if you know many Finnish men but they are famous for being reticent …

NG: When I was last in Finland, I heard this Finnish joke (and I have to say that after four visits to Finland, this is the only Finnish joke I've ever heard): a Finn sidled over to me, looking at the floor, and said: "Do you know how you can tell a Finnish extrovert?" I said: "No, how can you tell a Finnish extrovert?" And he says: "When he is talking to you, he looks at your shoes instead of his own."

ST: [laughs] That pretty much sums it up. I like the idea of contained emotion because I grew up most of my life feeling that way. As an adolescent people would always say I was not expressive and they always made the mistake of thinking that I didn't feel anything, because I didn't react to things. My mind reacts but usually a long time after the fact – if something exciting happens I'll just sort of go "okaaaay, let me process that", and then three days later I'm excited about it, when everyone else has left the room. So I identify with Finns that way. It's also an Australian thing and particularly characteristic of rural Australians. People have all these emotions – they're just not verbalising them. So Eric was partly about that.

By the time our friend left after two weeks, we'd invested a lot of time in showing him stuff because he didn't travel very often and it was a big trip to come from Scandinavia to western Australia – the opposite end of the earth. You know when you have a visitor you're never sure if things are interesting because you're so familiar with the landscape? After he left we were feeling as if the whole thing had been a failure because he hadn't expressed excitement about anything in particular, we felt we had failed as hosts. It was only much later when we and visited him in Helsinki, and I think he was more relaxed being at home, that he said it was the best trip he had ever had.

You sure couldn't tell that at the time. So Eric is a combination of that little sketch about the nut and that real-life experience. The sketch lingered for years. By itself an idea is not a story, but if you get two ideas that are completely unrelated – little leaf guy, Finnish visitor – and connect them together, suddenly it clicks.

NG: That is often the answer to "where do you get your ideas from" – two unrelated things come together and suddenly it produces something new. Two or more things …

ST: Yes, a minimum of two. It seems that they have to be unrelated, because otherwise your brain forms an existing association that's very hard to get away from. It's almost like you have to displace the emotion to examine it. If it's in its nice little gift-wrapped box, if it's packaged in the way that emotions in everyday life are so often packaged, we can file it away. But when emotion is attached to something that is completely outside of experience, it makes you examine it, as though it has no wrapper on it.

NG: Changing the subject completely, although inspired by what you just said, how do you feel about Shaun Tan tattoos? I've seen quite a lot of them now. Last time I was in Australia I saw several people with The Lost Thing, Eric …

ST: The first time it freaked me out – I felt: "Are you sure you want to do this?" People ask me for permission because they think there's some copyright issue. My response is "Unless you're going to sell your arm and make a profit I don't think there is one, so go ahead." At book signings people will show them to me.

When I was in Germany recently a guy came up to me with one patch of his leg shaved and a pen and said: "Draw something". I thought: "Oh man, this guy's going to live with this for the rest of his life," so I was holding his leg really tightly, to make sure it was carefully done, and drew this little lightbulb-headed creature.

I feel the same way about that as I do about anybody commenting on a book – the book belongs to them anyway. It doesn't really have that much to do with me once it's out there. It's like a jigsaw puzzle that I've finished and put back in the box. I don't know if you feel the same way?

NG: I think I feel that the jigsaw puzzle pieces never quite go back in the box. There may be a few things that I have never felt any urge to go back to, but most things I feel I didn't get quite right, so I keep chewing at them long after they are finished.

ST: I don't know about you but when someone first mentions an adaptation, I have, probably a little bit inappropriately, a feeling of weariness at revisiting that work after I'd struggled with it for so many months or years. But then the second thought is "Wow, what a great opportunity to fix up all those dodgy bits."

NG: It's so nice to hear you say that. Somebody asked me recently if I plot ahead of time. I said yes I do, but there is always so much room for surprise and definitely points where I don't know what's going to happen. They quoted somebody who had said: "All writers who say that they do not know what's going to happen are liars, would you believe someone who started an anecdote without knowing where it was going?" I thought, but I don't start an anecdote to find out what I think about something, I start an anecdote to say this interesting thing happened to me. Whereas I'll start any piece of art to find out what I think about something.

ST: Exactly.

NG: I'm going to learn something I didn't know when I began. I'm going to discover how I feel and what I think about it during the process. I will break off little bits of my head and they will become characters and things will happen and they will talk to each other.

ST: Exactly, creating a character is like impersonating another being, so that you can find out what you think about something. You really find out what your style is when you diversify – setting something in a fictional landscape, the far future or distant past. A lot of people think of style or personality in terms of things you do often, but it's not really. It's what you do under duress, or outside of yourself. I don't feel I know myself really well because – again it's that emotional thing – sometimes I feel a little embarrassed by the amount of emotion that comes out in a story. I don't realise that there's so much of it locked up or in denial and then it comes out in the process of doing this conscious dreaming exercise.

NG: I love your stuff because you're never told what the emotion is. You get to feel it on your own and you get to discover the emotions along the way.